When Mayer Called Yahoo’s Mobile Revenue “Nascent,” She Wasn’t Kidding (And Here’s the Actual Number She Left Out)

On Yahoo’s recent fourth-quarter earnings call, CEO Marissa Mayer called the company’s mobile efforts a “nascent source of revenue,” a theme she reiterated in her appearance earlier this week at a Goldman Sachs investment conference in San Francisco.

There, she said that the company was going to cut down on its apps portfolio from more than 60 to “the dozen or so applications that people use all the time on their phone” to turbocharge efforts in the key arena.

Touting her mobile aspirations, as well as noting Yahoo’s clear weakness in the area, has been a carefully concerted Mayer effort to get in front of investors’ worries about the company’s mobile performance.

In fact, Mayer addressed the issue in an interview with Bloomberg recently, noting rhetorically: “Given that we do not have mobile hardware, a mobile OS, a browser or a social network, how are we going to compete?”

How, indeed.

Because, according to sources inside the company, direct mobile revenue hovers only around $125 million annually, mostly from search revenue on mobile devices. While users are consuming lots of Yahoo Web pages on their phones, which could technically boost the sales numbers higher, rendering most desktop-created ads on mobile is not the same thing as the significant mobile revenue Yahoo needs to generate.

There’s no question that Mayer has taken every public opportunity she can to talk about how important mobile is to Yahoo’s future and how she is going to double down in the area. Along with loudly proclaiming her commitment to the fast-growing sector, she has also bought a number of small mobile startups since she arrived at the Silicon Valley Internet giant last year.

Last week that meant Yahoo scooped up Alike, a mobile app that helps users discover nearby venues and places to visit based on your interests.

But, while these acquisitions are all interesting and important to spur innovation and consumer engagement, they are still very tiny steps to solving the big problem for Yahoo to make mobile a truly significant revenue stream without any of the most critical elements of the ecosystem that rivals have.

It’s not that Yahoo has not tried in the past, having mounted several aggressive and quite elaborate mobile efforts over the years. But, without going into painful detail, most have had little traction overall and no needle-moving revenue to speak of.

The constant shifting of mobile-focused execs has been another difficulty, with little continuing leadership since Marco Boerries left in 2009. To fix that, Mayer appointed Adam Cahan as Yahoo’s mobile product kingpin in November. The former IntoNow founder and CEO oversees all mobile efforts, as well as its Flickr photo sharing service.

But mobile monetization is another issue, without a significant mobile advertising czar in charge — a task which then presumably falls to new COO Henrique De Castro. But while the Google exec is an experienced enough online ad exec, he was definitely not known at the search giant for any serious mobile expertise.

Impressive? Not exactly. By comparison, Facebook said it had 618 million daily active mobile users with 23 percent of its $1.33 billion in Q4 revenue from mobile, from an almost zero base a year ago.

That’s 10 times more than Yahoo — about $300 million a quarter versus $30 million.

Interestingly, at the Goldman conference, Mayer made the point that no one has cracked the mobile monetization puzzle. True enough, but both Facebook and, of course, Google are well down the road to doing so, while Yahoo remains stalled as yet.

To be fair, the acceleration of mobile monetization at Facebook is perhaps easier for the social networking giant, which has been achieving that by leveraging its singular product and audience and building its own mobile ad technology.

And Google has already been hard at work retrofitting its massive search business to aim at mobile, has strengthened its efforts with the purchase of AdMob and Motorola and, of course, has made the early and enormous investment in its Android platform.

From a stand start, it’s all a much harder task for Yahoo, which has a plethora of product offerings that all require different mobile monetization solutions. It’s a bigger problem since Yahoo’s own mobile ad targeting and contextual search is considered weak and unable to serve better targeted ads in a variety of mobile experiences. That means things as simple as when you search for a sports game, you get a beer ad.

In improving this, Yahoo has few choices — building it up in-house, acquiring a company with mobile ad expertise or partnering with someone in a significant manner, which most suggest is its best alternative in the short term.

The first is certainly important, which is why Mayer is pursuing the range of mobile startups she has, seeking both apps consumers will love and engineering expertise in the area. That is all well and good, but focus has to be on creating great products first and, as Mayer has said repeatedly, money should follow.

The second has also been considered, with Yahoo looking at a range of possible acquisitions to improve its mobile ad technology. In this, because of Yahoo’s huge scale, there are still few choices, boiling down to the larger players, JumpTap and Millennial.

Yahoo has mulled over acquiring both over the years and even recently, although the price tags are high and there are issues about whether this will solve the problem or not.

One possible short-term alternative is to do some kind of mobile advertising or contextual search deal with Google and perhaps one with Apple, which has its own iAd offering.

According to sources, Yahoo’s current search partnership does not preclude the company from working with Google in certain mobile monetization areas. In fact, the pair recently struck a deal, as Peter Kafka wrote, “to begin running some of its AdSense display ads on Yahoo sites, and will become one of several ad networks Yahoo uses to fill some of its pages.”

That’s money in the bank for Yahoo, which Mayer — an ex-Googler, too — knows might extend well to mobile monetization and innovation. She has famously handed out free smartphones to all employees, which is a nice touch and also an important message to send to them and others.

But it will take a lot more than an iPhone in every cubicle at Yahoo, because mobile is the issue she will be scrutinized for, given the stress she has put on it as one of the key ways to revive Yahoo.

“There is no question Marissa will be judged on bringing the product management expertise she demonstrated at Google to Yahoo to make things consumers want to use in mobile,” one top Yahoo insider told me. “The thing is, she has to also actually make some real money doing it.”

I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

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